Wall Street's First Panic (A)

Abstract

In the early 1790s, a flood of newly issued public and private securities sparked an investment boom in the nascent United States. In New York, the bustling commercial district along Wall Street emerged as the center of the city's securities trade. One of the many Americans drawn into the frenetic and largely unregulated securities market was William Duer, who ultimately became a major player on the Street. As it turned out, however, Duer's financial dealings proved unsustainable, and his financial collapse helped to bring the securities boom to a halt. Shocked by the widespread devastation wrought by Wall Street's first panic, the New York legislature acted quickly to ban outdoor securities auctions and a popular class of financial instruments known as "time bargains," both of which were thought to have contributed to the boom and bust on Wall Street. Facing public outrage along with the new legal restrictions, New York's top brokers had to decide whether a new system for securities trading was needed and, if so, what it should look like.

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In late February, 1791, Treasury Secretary Alexander Hamilton submitted a report to President Washington defending his recent proposal for a national bank, which he hoped would bolster the American economy and assist the federal government in managing its finances. Congress had approved the plan, but some of the President's advisers warned that the federal government lacked the authority to establish a bank because the Constitution did not grant it the power to charter corporations. In his rebuttal, Hamilton argued that Congress had “implied powers,” not specifically listed in the Constitution, which lawmakers could use when necessary to achieve legitimate goals. Because the proposed bank would assist Congress in executing its fiscal responsibilities, Hamilton believed that incorporating the bank fell well within Congress's constitutional authority.
As President Washington considered these arguments, he knew that his decision to sign or veto Hamilton's bank bill would extend far beyond the issue of the bank itself. If he approved, his assent would potentially encourage the broad exercise of implied powers in the future. A veto, on the other hand, would send the message that Congress had no authority beyond the powers explicitly listed in the Constitution. Either way, President Washington would be lending his considerable weight and prestige to one side of this seminal constitutional debate, and he was well aware that much was riding on his decision.

Moss, David, and Marc Campasano. "Battle Over a Bank: Defining the Limits of Federal Power Under a New Constitution." Harvard Business School Case 716-052, February 2016. (Revised August 2017.)
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In January 1965, Rev. Martin Luther King, Jr., the most prominent leader of the civil rights movement in the United States, launched a campaign of civil disobedience in Selma, Alabama, to bring national attention to disenfranchisement of black voters in the South. On Sunday, March 7, as part of this campaign, 400 mostly black protesters, not including King, tried to march across the Pettus Bridge, just outside Selma, only to be stopped by state troopers and local lawmen, who attacked them with tear gas and clubs. That night, all three national television networks broadcast film of the assault. The broadcasts sparked outrage against the attackers and sympathy protests across the country. King announced that he would lead a renewed march over the bridge on Tuesday, March 9.
By early Tuesday morning, however, King had learned that President Lyndon Johnson, whose help he needed to win federal voting rights legislation, did not want him to march, and that a federal judge had issued a restraining order against the march until a hearing could be held. King thought his supporters' passions were so strong that he might not be able to cancel the march even if he wanted to, yet the modern civil rights movement had never before defied a federal court order. President Johnson's representatives told King that he might avoid violating the judge's order if he marched to the bridge and then turned around before crossing it. King did not say what he would do, however, and few of his supporters knew about the turnaround possibility.
Several hours later, with television cameras recording the unfolding events, King led 2000 marchers to the bridge, where state troopers and lawmen waited. Should he try to turn the march around, which his followers might not accept, or try to cross the bridge, contrary to the president's wishes and a federal restraining order?

Americans elected Abraham Lincoln as the nation's first Republican president in November of 1860. Northern political leaders had formed the Republican Party only a few years before, in large measure to combat the spread of slavery. Southerners had long been wary of Northern hostility toward their “peculiar institution,” and Lincoln's 1860 victory proved to be the last straw in this sectional rivalry that had deeply influenced American culture and politics since the earliest days of the republic.
By the time of Lincoln's inauguration five months later, in March 1861, seven Southern states had announced their decision to secede from the Union. Lincoln rejected secession as unlawful and pledged that his government would continue to exercise its authority, as best it could, in the rebellious states. A crisis in South Carolina, the first state to secede, tested Lincoln's mettle in the opening days of his presidency. Federal troops still held Fort Sumter in Charleston harbor, but their supplies were running low. Lincoln would either have to evacuate the fort or risk war by sending provisions. The new president understood the weight of the choice he faced: nothing less than the survival of the Union was at stake.